(Sharecast News) - Stocks in Europe have managed to turn around even after the Chinese government apparently upped the ante on the geopolitical front by announcing it would impose national security laws, bypassing the city's legislature and therefore potentially in effect reneging on promises to respect its one state, two-systems policy.

The news sent Hong Kong's benchmark nearly 6% lower overnight as traders worried of the knock-on impact of Beijing's decision on global geopolitics.

A law passed in the US in 2019 allows for sanctions to be placed on any Chinese officials responsible for undermining that Chinese special administrative region's autonomy, possibly including by revoking its special trade status.

Against that backdrop, as of 1500 GMT the benchmark Stoxx 600 was drifting up by 0.01% to 340.12, alongside a 0.05% advance for the German Dax to 11,067.28, while the Cac-40 was also 0.01% higher to 4,445.82.

Commenting on those geopolitical tensions, Craig Erlam, senior market analyst at Oanda, said: "Of course, China is hardly innocent in all of this and will no doubt be relishing the prospect of a Trump-free White House.

"And to make matters worst, we're heading for more protests in Hong Kong [...] This once again puts them on a collision course with Washington due to the special status the region currently enjoys. Expect further hostility in the weeks and month's to come."

Of interest, in a research note released overnight titled "Immoral Hazard", strategists at Bank of America reiterated their "tactically bullish" stance on US equities, pointing to still bearish "positioning" on the part of investors and policymakers' decisions which they said were forcing investors to " buy, banks to lend, corporate zombies to issue in 2020; but clearly big technical levels immediately ahead (SPX 3000, NDX 10000, DXY100)."

To take note of as well, in response to the latest geopolitical moves, the US dollar spot index was adding 0.47% to 99.84, while euro/dollar was 0.49% lower to 1.0896.

For their part, analysts at Morgan Stanley noted how stocks in the European Union were most recently only "catching a bid" during US trading hours.

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